How Congress Can Wage an Effective Trade War

Trump's proposed tariffs won't do much for American workers, but what if Democrats return to power on Capitol Hill?

March 6, 2018

Republican leaders have finally found cause to break with Donald Trump, though not for any of the gravest reasons available. On Monday, House Speaker Paul Ryan sharply criticized the president for planning to impose a 25 percent tariff on imported steel and a 10 percent tariff on imported aluminum. Congressional Republicans even floated ways to take back authority over trade policy. “We are extremely worried about the consequences of a trade war,” said Speaker Ryan’s spokesperson AshLee Strong.

No Republican offered details on how they might block the tariffs. But the Founding Fathers did give tariff authority to Congress, not the White House. And there were good reasons for that: Congress sits closer to, and has more accountability from, the American people. Ironically, transitioning trade policy back to where it belongs would probably have the opposite effect that Ryan wants over time. The public doesn’t like the free trade consensus and what it’s done to the middle class. Congress, particularly one under Democratic control, would be better positioned to fix this, ensuring a trade agenda that doesn’t leave U.S. workers behind.

There’s been a lot of hyperventilating over the tariffs, but they’re hardly an anomaly of the Trump era. Presidents Obama, Bush II, Clinton, and Reagan all employed steel tariffs of varying degrees over the past thirty-plus years, even targeting allies like Japan, South Korea, Brazil, and Germany. The U.S. already has 113 tariffs in place against steel imports because there’s a global overcapacity in steel, propped up by foreign governments’ industrial policies.

None of these earlier tariffs caused much change in domestic steel production, nor did they cause recessions; the famed study showing 200,000 job losses from the Bush steel tariffs of 2002-2003 came from a trade group paid for by affected businesses—hardly an unbiased source. Even the New York Times economist Paul Krugman, while warning of the coming apocalypse of the Trump tariffs, snuck into the last paragraph: “In themselves, these tariffs aren’t that big a deal.” That’s because a tariff on one sector comprising 0.15 percent of U.S. GDP will never alter much of anything.

Presidents of both parties employ steel tariffs not for economic reasons, but political ones: to satisfy disadvantaged Rust Belt states. The tariffs are unfocused and inadequate and unlikely to re-create the golden age of American manufacturing. Maybe America’s unsteady chief executive will bungle the country into something worse. But it’s undeniable that he’s following a campaign strategy that helped him in 2016. If tariffs are so obviously repugnant to the elite classes, why are they popular among the public?

Article I, Section 8 of the Constitution gave Congress exclusive authority to “lay and collect Taxes, Duties, Imposts, and Excises,” and to “regulate Commerce with foreign Nations.” Gradually Congress handed this power to the president, first to Franklin Roosevelt to negotiate tariffs within a narrow band, and finally to Richard Nixon in the Trade Act of 1974, which functionally eliminated Congress’ power over trade policy. The president got to pick trade partners, launch negotiations, sign agreements that included broad policy changes, and get an up-or-down vote in Congress within 90 days, with no committee markups, amendments, or filibusters, and strictly limited debate.

This transfer of power occurred as the global trading system developed. As The Week’s Ryan Cooper and HuffPost’s Zach Carter have explained, the U.S. has accepted the world’s largest trade deficit for 40 years, in a trade-off between cheaper goods, global stability, and the hollowing out of the country’s industrial base. Surplus countries financed America’s trade deficit to create a market for their products, and Americans marveled over $2 socks at Walmart while factories shuttered nationwide.

This is the consensus that Ryan doesn’t want to upend, though I doubt he’s asked his constituents in Janesville about it. America has long been in a trade war, and since the 1990s, the American middle class has lost. Chief executives of both parties have done little to alleviate the suffering besides performative tariffs, preferring to use trade as a tool of foreign policy, a way to impose national and corporate dominance. Trump won’t fix this, but he sure didn’t cause it.

At least members of Congress might heed their constituents’ anger and frustration. In fact, Congress was ready to vote down the Trans-Pacific Partnership in 2016, because it merely reflected a corporate wish list of permanent deregulation. Congress has consistentlyvoted to impose penalties on currency manipulation, which makes foreign goods artificially inexpensive and tilts the playing field against U.S. workers.

National Review’s Jay Cost seems to think that Congress can’t do anything right on trade policy. He bases this view on a series of examples dating back eight decades, before all but the oldest members of Congress were even born. “Because the legislature cannot represent those interests responsibly, it hands power off to unelected courts or an executive with just two offices out of millions that are popularly elected,” Cost writes.

But his history reflects ideological bias. Tariffs were a sign of corruption in the Gilded Age, as Cost points out, but that’s because they insulated giant trusts from competition. The Smoot-Hawley tariff, always trotted out (by members of both parties) as an example of Congress’ trade incompetence, didn’t actually cause the Great Depression or play much of a role in it.

In reality, today’s Congress has blueprints for a trade policy that benefits a broad cross-section of workers. Economists Jared Bernstein and Dean Baker explain at the Washington Post how subsidizing employers to hire those displaced by trade, or even initiating public job creation to pick up the slack, would solve some of the distributional problems. So would eliminating the protectionism embedded in trade deals, like expanded patent protection for software and medicines, cracking down on currency manipulation. A more expansive framework from Bernstein and Lori Wallach includes more ideas, like enforceable labor and environmental standards so U.S. jobs don’t flow to authoritarian countries that suppress wages through violence, and an end to investor-state dispute settlements that let companies sue governments for the loss of expected future profits.

If Ryan doesn’t like Trump’s positions on trade, he can give authority back to the people by blocking the renewal of trade promotion authority, which cedes responsibility for negotiating trade agreements to the executive and expires July 1. But if he did, I’m not sure he’d like the outcome. The likely Democratic takeover of the House in November will usher in a Congress that’s more hostile to a trade consensus that has failed U.S. workers. They might actually fight the globalization agenda in a meaningful way, not with a puny tariff to please a white steelworker in Ohio.